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Business News/ Markets / Stock Markets/  Why Bajaj Finance shares have tanked 8% despite double-digit YoY growth in PAT, NII in Q4?
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Why Bajaj Finance shares have tanked 8% despite double-digit YoY growth in PAT, NII in Q4?

Bajaj Finance's shares cracked over 8 per cent in intraday trade on Friday. They have gained about 20 per cent over the last year (till April 25), underperforming the benchmark Sensex, which has gained about 24 per cent in the same period.

Bajaj Finance shares suffered strong losses in trade on Friday, April 26, following the company's March quarter result. AFP PHOTO/Ralphson DAVID (AFP)Premium
Bajaj Finance shares suffered strong losses in trade on Friday, April 26, following the company's March quarter result. AFP PHOTO/Ralphson DAVID (AFP)

 Bajaj Finance shares tanked over 8 per cent in intraday trade on Friday, April 26, a day the company released its Q4 result. Bajaj Finance shares opened at 7,008.60 against its previous close of 7,293.90 and cracked as much as 8.3 per cent to the level of 6,691.40 on BSE. Around 2 pm, Bajaj Finance shares traded 8.05 per cent lower at 6,707 apiece. Equity benchmark Sensex was 0.74 per cent down at 73,787.86 at that time.

Why did Bajaj Finance shares tank?

Bajaj Finance reported a healthy profit and net interest income rise for Q4FY24. However, the lender's Q4 net interest margin contraction appears to have worried investors.

Post market hours on Thursday, April 25, Bajaj Finance reported a 21 per cent year-on-year (YoY) rise in consolidated net profit to 3,825 crore in Q4FY24.

Its net interest income (NII) for Q4FY24 saw a 28 per cent YoY rise to 8,013 crore against 6,254 crore in Q4 of FY23. 

However, the lender's net interest margin (NIM) shrunk 21 basis points (bps) in Q4 over Q3.

Gross NPA (non-performing assets) and net NPA stood at 0.85 per cent and 0.37 per cent as of March 31, 2024, respectively, against 0.94 per cent and 0.34 per cent as of March 31, 2023.

Also Read: Bajaj Finance Q4 hit by rural loan losses, RBI restrictions

As of the close on April 25, Bajaj Finance's share price has gained about 20 per cent over the last year, underperforming the benchmark Sensex, which has gained about 24 per cent in the same period.

Motilal Oswal downgrades Bajaj Finance stock

After the Q4 result, brokerage firm Motilal Oswal Financial Services downgraded Bajaj Finance stock to a 'neutral', pegging a target price of 7,800 as it said there are limited upside catalysts for Bajaj Finance despite a healthy PAT CAGR of nearly 25 per cent over FY24-FY26E, and an RoA (return on assets) and RoE (return on equity) of 4.3 per cent and 22 per cent, respectively, in FY26E.

"Management’s guidance for FY25 is below its long-term guidance on multiple metrics such as AUM growth, credit costs, RoA, and RoE," Motilal Oswal said.

"Bajaj Finance’s key product segments (until now) have been the secular growth segments. However, its foray into multiple newer products such as cars, tractors, CVs, and potentially MFI, could (in future) make its growth vulnerable to cyclicality despite having a well-diversified product mix," said the brokerage firm.

However, Kotak Institutional Equities has maintained its 'add' call on the stock with a target price of 7,800.

The brokerage firm said Bajaj Finance’s Q4FY24 earnings were in line as the company ended the year with strong 34 per cent loan growth, albeit accompanied by NIM compression and increased credit costs, on a low base.

"The normalization in business matrices (growth in the mid-20s, NIM compression due to rising rates and shifting business mix, a reversion in credit costs albeit improving operating leverage) will put near-term pressure and drive earnings cuts, even as overall performance remains healthy," said Kotak.

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Published: 26 Apr 2024, 09:27 AM IST
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